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Why Ten $1's Are Not Treated as a $10

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  • Huang, Pidong
  • Igarashi, Yoske

Abstract

We study the stability of monetary steady states in a random matching model of money where money is indivisible, the bound on individual money holding is finite, and the trading protocol is buyer take-it-or-leave-it offers. The class of steady states we study have a non-full-support money-holding distribution and are constructed from the steady states of Zhu (2003). We show that no equilibrium path converges to such steady states if the initial distribution has a different support.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 46623.

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Date of creation: 30 Apr 2013
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Handle: RePEc:pra:mprapa:46623

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Keywords: random matching model; monetary steady state;

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  1. Pidong Huang & Yoske Igarashi, 2013. "Trejos-Wright with a 2-unit bound: existence and stability of monetary steady states," Discussion Papers, Exeter University, Department of Economics 1311, Exeter University, Department of Economics.
  2. Zhu, Tao, 2003. "Existence of a monetary steady state in a matching model: indivisible money," Journal of Economic Theory, Elsevier, Elsevier, vol. 112(2), pages 307-324, October.
  3. Wallace, Neil & Zhu, Tao, 2004. "A commodity-money refinement in matching models," Journal of Economic Theory, Elsevier, Elsevier, vol. 117(2), pages 246-258, August.
  4. Trejos, Alberto & Wright, Randall, 1995. "Search, Bargaining, Money, and Prices," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 103(1), pages 118-41, February.
  5. Edward J. Green & Ruilin Zhou, 2000. "Dynamic monetary equilibrium in a random-matching economy," Working Paper Series, Federal Reserve Bank of Chicago WP-00-1, Federal Reserve Bank of Chicago.
  6. Hector Lomeli & Ted Temzelides, 2002. "Discrete time dynamics in a random matching monetary model," Economic Theory, Springer, Springer, vol. 20(2), pages 259-269.
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Cited by:
  1. Huang, Pidong & Igarashi, Yoske, 2013. "Trejos-Wright with a 2-unit bound: existence and stability of monetary steady states," MPRA Paper 46624, University Library of Munich, Germany.
  2. Huang, Pidong, 2013. "Robustness of Stability to cost of carrying money in a Matching Model of Money," MPRA Paper 46625, University Library of Munich, Germany.

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